The Chinese Government invests in LED Chips poorly causing Over Expansion, Price Deflation and Factory Closures

Posted by PITHOCRATES - May 27th, 2012

Week in Review

China’s formula for success is to partner government with business.  Like they did in Japan during the Eighties.  Before Japan’s Lost Decade.  And their deflationary spiral.  China is using the same formula.  Having government invest in corporations to expand production to dominate the market.  And, of course, create some bubbles along the way (see Analysis: Falling prices to kill off half of Chinese LED chipmakers by Leonora Walet and Twinnie Siu posted 5/27/2012 on Reuters).

In China, surplus capacity and sliding prices are sounding the death knell for half of the companies making light emitting diode (LED) chips used in Samsung television panels and Sharp computer monitors, with only the large, state-backed players likely to pull through.

Sluggish global sales of TVs and computers may further cut LED chip prices by 20 percent this year, and consolidation or closure are the only options for China’s smaller LED players, analysts say.

By contrast, Sanan Optoelectronics Co Ltd, China’s top LED chipmaker with a market value of $2.8 billion, and Elec-Tech International Co Ltd will be among a handful of large companies that will survive as they continue to receive subsidies and incentives from the government, according to analysts…

For the majority of LED firms, the government is slowly rolling back incentives, including tax breaks, free land and more than $1.6 billion in cash to buy LED chip-making equipment, that had helped sustain the industry for more than three years.

Proview International, whose Shenzhen-based unit is battling Apple Inc over the iPad trademark in China, is grappling with slumping LED prices and fierce competition that have dragged down earnings for other LED companies including Hangzhou Silan Microelectronics Co and Foshan Nationstar Optoelectronics…

Many LED companies are operating their factories at 50 percent capacity in China, with up to half of the 700 or so chip-making machines purchased with government money during the boom years in 2009 and 2010 left idle, industry watchers say.

In the past year, overcapacity has shut hundreds of small Chinese makers of LED lighting, according to analysts.

“China’s financial policy is not giving enough support to mid-tier and smaller enterprises,” said Bao En Zhong, executive vice chairman of the semiconductor lighting association in Shenzhen, one of China’s largest production bases for LED lighting. “We may see more factory closures…”

So the secret to success in China is government incentives, tax breaks, free land and lots and lots of cash.  If you can get this from the government you, too, can flood the market with product.  Sending your prices into a tailspin.  Then all you have to do is be one of the lucky few the government bails out so you can flood the market with more of your product.  Sending your prices into a tailspin.  Again.

People say this type of dumping of low-priced products onto the market hurts consumers.  I never understood that.  Here the Chinese helped to bring the cost of televisions down by making the chips that make them work so dirt cheap that they shuttered hundreds of Chinese manufacturers.  And chip prices may fall by another 20%.  I just don’t see how the consumer loses here.  It looks like the losers are the hundreds of shuttered businesses.  And the Chinese government who invested so much into those businesses.

This is state-capitalism.  Where businesses make bad decisions because of the free government handouts.  If it weren’t for those free government handouts these businesses wouldn’t have produced so many chips that they put themselves out of business.  You add up all of this bad government investment throughout China and it says only one thing.  A day of reckoning is coming.  If the Chinese don’t believe it they can ask the Japanese.

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LESSONS LEARNED #83: “Those who don’t pay taxes will always approve higher tax rates on those who do.” -Old Pithy

Posted by PITHOCRATES - September 15th, 2011

To win Elections using Class Warfare you need lots and lots of Poor People

The Democrats want to tax the rich. To make them pay their fair share.  As determined by them.  And they accuse Republicans of cutting taxes for the rich.  Giving them tax breaks.  Credits.  And loopholes.  All paid for by the poor.  Or so they say.  The Republicans deny this, of course.  They want lower tax rates across the board.  For they believe lower tax rates create jobs.  By removing uncertainty for business.  Giving them confidence to invest.  And grow their businesses.  Thus creating those jobs.  The Democrats counter that lower tax rates just make more rich people.

We call this class warfare.  Getting the poor people to hate the rich people.  Blaming the rich for their poorness.  And making the poor understand that if it weren’t for the taxes the poor pay the rich couldn’t have their mansions.  Or their private jets.  Because the poor subsidize the rich in America.  As least according to the Democrats.  As nonsensical as this is.  For mansions and private jets are expensive.  So expensive that the poor can’t afford them.  Yet their taxes can buy them for the rich.  Silly argument, yes.  Then again, class warfare isn’t based on logic.  Or common sense.  It’s based on pure, raw emotion.  Feelings.  The rich are rich.  The poor are not.  And that’s all the poor need to know.

This is how Democrats win elections.  By promising to raise taxes.  Normally, anyone who says they will take more of your money will find it difficult to win elections.  But when you promise to take more of someone else’s money, well, that’s a different story.  You just need one thing.  Lots and lots of poor people.  Who you can make feel good by taxing the rich.  By punishing the rich.  Making sure the rich get their just deserts.  And I don’t mean some hoity-toity crème brûlée.  Which, incidentally, is delicious.  No.  We’re talking about a good ole fiscal smack-down.  A swift kick to the financial bonbons.  The wallet.  It won’t change your life.  If you’re poor.  But it’ll make you feel good.  And that’s what class warfare is all about.  Feelings.

Using the IRS Numbers to see who has been Paying the Bulk of our Federal Taxes

You get tired hearing the same old lies.  No doubt you agree with me.  Regardless of what side of the aisle you hail from.  Some of you are absolutely sure the Democrats are lying.  And some of you are absolutely sure the Republicans are lying.  Can’t be both.  Well, it can be both, I guess.  But one side has to be more truthful than the other.  Considering how diametrically opposed the two sides are.  So let’s ignore the arguments.  Let’s find our own truth.  Let’s go to the numbers.

The IRS breaks downs tax revenue in numerous ways.  One of which is by income groups.  So we looked at these breakdowns.  For the years 1995 – 2008.  This takes us from the midpoint in Bill Clinton‘s presidency.  Through George Bush‘s.  The IRS breaks down incomes across many income groups.  We’ve added some of them together to reduce their numbers down to four groups.  As shown here:

The percent of returns is from 2007.  This is the percentage of total federal income tax returns filed with the IRS.  We picked this year to show where income had trended to before the subprime mortgage crisis.  So, without further adieu, let’s see who has been paying the bulk of our federal taxes.  The rich.  The poor.  Or somewhere in between.

The Rich and Middle Class pay over 90% of all Federal Taxes

We’ve broken these numbers down into the four income groups.  Then we calculated the percentage each group paid of the total tax revenue.  And graphed the results.  As shown here:

(Source:  SOI Tax Stats – Individual Income Tax Rates and Tax Shares)

We can glean a couple of things from these numbers and this chart.  First of all, the middle class still makes up about half of all taxpayers.  And there are very few ‘rich’ people.  Only about 16% in 2007.  And that counts anyone earning $100,000 or more as rich.  Based on how few rich there are and the amount of federal taxes they pay, it’s hard to say that they aren’t paying their fair share.

People earning less than $14,000 virtually pay no taxes.  They hardly paid anything during the Clinton presidency.  And paid even less through the Bush presidency.  If we call these people poor, then the poor aren’t paying for the rich.  They’re not even paying their own way.

The next income group also shows a continuous decline.  Those who start to earn some serious money for the first time in their lives pay little in federal taxes.  Less than 10% for the last fifteen years.  And less and less as the years go by.  So, clearly, those earning less than $30,000 per year are hardly paying any federal taxes at all.  And are not subsidizing the rich in any shape, manner or form.  If anyone is being subsidized, it is those earning less than $30,000.  Some 33% of all taxpayers.  And who’s paying their way?  The rich and middle class.

So who’s paying the most in taxes?  The rich and middle class.  In that order.  In fact, they are paying about 90% of all federal taxes.  And have been for the last 15 years.  (Or more.)  During Clinton.  And Bush.  In fact, the rich paid a larger percent of all taxes under Bush (the Republican) than they did under Clinton (the Democrat).  Not exactly what you’d expect based on the political rhetoric.  And the middle class paid less under Bush than they did under Clinton.  In further fact, everyone except the rich paid less in taxes under Bush than they did under Clinton.  So whoever says the ‘rich’ aren’t paying their fair share are either lying.  Or grossly misinformed.

The more Rich People there are the Bigger Percent of Total Tax Dollars they Pay

Notice the top two graphs.  They’re almost mirror images of each other.  As the rich pay more in taxes, the middle class pay less.  This is a good thing, yes?  Transferring more and more of the tax burden to the rich?  It’s what the Democrats say they want.  So it’s interesting to see when the rich pay more in taxes.  During good economic times.  When policies are favorable to business.  And there are lower tax rates.  Never was more of the tax burden transferred to the rich than it was than after the Bush tax cuts.

There are a couple of things happening here.  During recessions (early 2000s and late 2000s), tax revenue from the rich fell.  Because businesses revenue fell.  So business profits were down.  As were income taxes.  On businesses.  And highly paid employees these businesses laid off.  So overall tax revenue was down.  Which made the middle class’ portion of tax revenue a greater percentage of the total.  Not because they were paying more.  But because the rich were paying less.  Which explains the mirror image of these two graphs.

But there’s something else happening, too.  Remember when the Democrats said tax cuts don’t create jobs?  They just create more rich people?  Well, they were partially right.  As the economy expands so does wealth.  Employees leave their companies and start their own businesses.  People advance in their careers and make a lot more money.  Entrepreneurs strike it rich with new innovation.  And you know what all of this means?  People leave the middle class.  And join the rich.  Where they pay more taxes than they ever did before.  Transferring more and more of the tax burden from the middle class to the rich.  Which also explains the mirror image of these two graphs.

The more rich people there are the bigger percent of total tax dollars they pay.  So if the Democrats were true to their word they wouldn’t punish the rich.  Instead, they would focus their energy on making more rich people.  To help the poor and middle class.

The Democrats sacrifice the Poor for Votes

Now it’s interesting how the different political parties interpret these graphs.  Republicans are interested in the top two.  They would like to make business friendly policies to grow business.  And create jobs.  Make as many rich people as possible.  So more and more of the tax burden can be transferred to them.  Not by high tax rates.  But by robust economic activity.

The Democrats, on the other hand, are interested in the bottom two graphs.  Those making $30,000 or less.  They want to see these graphs falling to zero.  And they want to increase the total number of people earning $30,000 or less.  Because those who don’t pay taxes will always vote for you if you promise to raise tax rates on the rich.  And the more poor there are the more political power the Democrats have.  I mean, that 33% who pays virtually no income taxes?  Who do you think they’re going to vote for?  That’s right.  Whoever promises to punish the rich.  And punish they will.  For they want to transfer as much of the tax burden to the rich as possible.  Not by robust economic activity.  But buy punitive tax rates.

This is class warfare.  Based on raw emotion.  Feelings.  Not logic.  Or common sense.  They get the poor angry.  And blame the rich for their poorness.  This is how they win elections.  They lie.  The Democrats.  And say they are punishing the rich.  When they are in fact punishing the poor.  And the middle class.

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Obama uses a Joint Session of Congress for a 2012 Campaign Speech on Jobs

Posted by PITHOCRATES - September 9th, 2011

The Obama Jobs Speech was the Same Old Same Old with the Angry turned up to Eleven

The big speech was last night.  President Obama‘s Jobs speech.  After waiting with bated breath.  For him to come back from vacation.  On Martha’s Vineyard.  Where no one wants for a job.  Or anything.

What you thought of it depends on your party affiliation.  If you’re a Big Government liberal Democrat that wants to stick it to the rich, I’m sure you liked it.  If you were looking for substance, I’m sure you were disappointed.  It was just the same old same old.  With the angry turned up to eleven.

Here are some selections from the transcript with commentary (see Obama jobs speech transcript: Full text (as delivered) posted 9/8/2011 on Politico).

These men and women grew up with faith in an America where hard work and responsibility paid off. They believed in a country where everyone gets a fair shake and does their fair share — where if you stepped up, did your job, and were loyal to your company, that loyalty would be rewarded with a decent salary and good benefits; maybe a raise once in a while. If you did the right thing, you could make it. Anybody could make it in America.

For decades now, Americans have watched that compact erode. They have seen the decks too often stacked against them. And they know that Washington has not always put their interests first.

Yeah, it used to be like that.  Until greed set in.  Government greed.  Their insatiable want of private sector wealth.  And power over our lives.  High taxes.  And punishing regulations.  These have hurt American businesses that once provided those fair shakes.  It’s President Obama and his party that have been making this a business unfriendly nation.  Giving American businesses an unpleasant choice who struggle to compete.  Either close.  Or conduct business in a country that lets them compete.

Just look at the effect of Obamacare.  All hiring is frozen.  And those who can get Obamacare waivers are.  The communist Chinese don’t have these problems.

The question is whether, in the face of an ongoing national crisis, we can stop the political circus and actually do something to help the economy.

He says as he scolds the American people.  And our Republican representatives.  Yelling at us.  Scowling at us.  Fed up with us.  Because he is not getting his way.

Ultimately, our recovery will be driven not by Washington, but by our businesses and our workers.

Absolutely right.  And the best thing Washington can to is to stop helping.  Their tax and regulatory policies are smothering economic growth.  You want to help?  Then get out of the way.  And let business do what business does best.  Grow.  And create jobs.  To meet demand.  That the market is demanding.  Not building what the government thinks is best.

I am sending this Congress a plan that you should pass right away. It’s called the American Jobs Act. There should be nothing controversial about this piece of legislation. Everything in here is the kind of proposal that’s been supported by both Democrats and Republicans — including many who sit here tonight. And everything in this bill will be paid for.

That urgent is it?  Urgent.  But not so urgent to cancel your luxurious vacation on the exclusive Martha’s Vineyard?  Where the rich and famous vacation to get away from people like us.  You know, if it could wait until after Martha’s Vineyard, it can’t be that important.

Democrats and Republicans support everything in this plan?  If so why isn’t this already law?  If not important before, why is it now?  Some two and a half years into your presidency?  And some two and a half years after applying your laser-like focus on job creation?

It will create more jobs for construction workers, more jobs for teachers, more jobs for veterans, and more jobs for long-term unemployed.

Jobs for teachers?  There’s nothing stimulative about that.  They don’t hire workers.  And the kids they teach aren’t going to hire any workers for a very long time.  This is just more money for teachers’ unions.  Which will be funneled back to the Democrat Party via union dues.

We pay teachers with tax dollars.  Paid by the taxpayers.  This is money the government transfers from the private sector economy to the public sector teachers.  So before teachers can stimulate with this money the private sector has to lose it first.  They take a large sum of money from the private sector.  And give it to the teachers.  Less administration costs to make this all happen.  To stimulate the private sector economy.  Which means the teachers spend less money than the private sector would have if they were able to keep their money.  This is a net loss of economic activity.  And is not stimulative.

Teachers are like government.  They provide an important service.  But they are taxpayer financed.  And like anything taxpayer financed, they are a drag on the economy.

More shovel-ready construction projects?  You told us yourself there is no such thing as a shovel-ready project.  This won’t be stimulative either.  Construction projects just don’t happen overnight.  Even if you get rid of all the regulatory red tape.  Projects take months to engineer.  If you cut that short there will be cost overruns to correct all the things missed in the engineering process.  Then there’s the asbestos abatement study.  Lead abatement.  Environmental impact studies.  At best these will start hiring in time for the 2012 election campaign.  Which no doubt is the goal.

It will provide — it will provide a tax break for companies who hire new workers, and it will cut payroll taxes in half for every working American and every small business. (Applause.) It will provide a jolt to an economy that has stalled, and give companies confidence that if they invest and if they hire, there will be customers for their products and services. You should pass this jobs plan right away. (Applause.)

If tax breaks are good for businesses then just cut tax rates.  A tax rate cut is more stimulative than a onetime tax credit.  A tax credit does not instill business confidence.  Because hiring a new employee is far more costly than any onetime tax credit.  Especially with Obamacare bearing down on small businesses.  It’s these permanent costs of current tax and regulatory policies.  These are what are keeping business skittish about expanding and hiring.  And a onetime tax credit won’t change that.  A repeal of Obamacare would probably spark some business growth.  But not a targeted tax credit.

Pass this jobs bill — pass this jobs bill, and starting tomorrow, small businesses will get a tax cut if they hire new workers or if they raise workers’ wages.

Wishful thinking.  Whoever came up with this is an economic simpleton.  He might as well have asked everyone to voluntary pay more for their groceries.  So the stores will hire more people with all that additional profit.  Employees are another cost of doing business.  Voluntarily increasing these costs above the market cost will only make these businesses less competitive in the market place.  Threatening their business.  And all the jobs they currently provide.

It’s not just Democrats who have supported this kind of proposal. Fifty House Republicans have proposed the same payroll tax cut that’s in this plan. You should pass it right away. (Applause.)

Yes, payroll tax cuts are good.  They reduce the cost of doing business.  And let employees keep more of their earnings.  So cutting Social Security and Medicare taxes will help.  But this will only set up higher taxes down the road.  Because these programs are going broke.  Businesses understand this.  They know it will only be temporary.  And illusionary.  For they will pay more in the future.  So they aren’t going to hire more now.

Building a world-class transportation system is part of what made us a economic superpower. And now we’re going to sit back and watch China build newer airports and faster railroads? At a time when millions of unemployed construction workers could build them right here in America? (Applause.)

No.  It didn’t.  We took over the title of economic superpower from the British before the federal highway bill.  And private industry built the railroads.  And robber barons.  Sure, government helped.  But it didn’t lead the way.

China?  Really?  Why is China building so much infrastructure?  Because they have cheap labor.  They couldn’t do what they’re doing if their labor costs were the same as ours.  And that high-speed rail system?  They’re now questioning quality and safety.

And there are schools throughout this country that desperately need renovating.

According to my calendar it’s September.  And I’m pretty sure it’s September throughout the country.  Which means what?  That’s right.  The kids just went back to school.  Which means the next round of school renovation projects will take place starting next June.  When the kids get out of school.  Not very stimulative if you ask me.  Unless you just want a lot of people working on these school renovations during the 2012 election campaign.

And to make sure the money is properly spent, we’re building on reforms we’ve already put in place. No more earmarks. No more boondoggles.

Just like you promised your $800 billion stimulus wouldn’t contain any pork or earmarks?  When it was mostly pork and earmarks?  Fool us once shame on you.  Fool us twice shame on us.

And we’ll set up an independent fund to attract private dollars and issue loans based on two criteria: how badly a construction project is needed and how much good it will do for the economy. (Applause.)

Great.  Nothing guarantees to speed things up like making it go through a new government bureaucracy.  Which can better send money to friends of the administration.  Just like that $800 billion stimulus.

Pass this jobs bill, and companies will get a $4,000 tax credit if they hire anyone who has spent more than six months looking for a job.

Let’s crunch some numbers.  Say you hire someone.  Pay them $30,000.  Your half of Social Security and Medicare taxes come to $2,295 for the year.  Now factor in your other costs.  State and federal unemployment insurance.  Workers’ compensation insurance.  Health care.  Etc.  Not to mention their salary.  It adds up to a lot of money.  Far more than that $4,000 tax credit.  For hiring someone they don’t need to support their current level of business.  And you know what?  A smart business owner isn’t going to do this.

The plan also extends unemployment insurance for another year. (Applause.) If the millions of unemployed Americans stopped getting this insurance, and stopped using that money for basic necessities, it would be a devastating blow to this economy.

The government has to take that money out of the private sector economy first.  Before it can pay unemployment benefits.  Someone is still spending that money.  Just a different someone.  By the time you add in the cost of administering those benefits, there is a net loss in economic activity. 

Unemployment benefits help the unemployed while they look for another job.  They don’t stimulate the economy.

The agreement we passed in July will cut government spending by about $1 trillion over the next 10 years. It also charges this Congress to come up with an additional $1.5 trillion in savings by Christmas. Tonight, I am asking you to increase that amount so that it covers the full cost of the American Jobs Act. And a week from Monday, I’ll be releasing a more ambitious deficit plan — a plan that will not only cover the cost of this jobs bill, but stabilize our debt in the long run. (Applause.)

Standard and Poor’s wanted to see $4 trillion in real spending cuts.  Not cuts in the out-years that will disappear in the next budget deal.  Real cuts.  If not they said they would downgrade the U.S. sovereign debt rating.  They couldn’t do it.  The best they could do was a $1 trillion tax cut over the next 10 years.  And by golly if S&P didn’t downgrade our credit rating.

And the special commission is to find another half trillion in spending cuts?  On top of the $1.5 trillion they were already looking for?  That Congress was unable to find?  And now they have to find $2 trillion?  Yeah, like that’s going to happen.  That’s a plan with but one goal.  Failure. 

With this kind of spending, a deficit reduction plan can only mean one thing.  More taxes.  Just what the economy needs.  Not.

While most people in this country struggle to make ends meet, a few of the most affluent citizens and most profitable corporations enjoy tax breaks and loopholes that nobody else gets. Right now, Warren Buffett pays a lower tax rate than his secretary — an outrage he has asked us to fix. (Laughter.) We need a tax code where everyone gets a fair shake and where everybody pays their fair share.

An executive secretary probably earns something north of $60,000 a year.  That puts her in a top marginal tax bracket of 25%.  Crunching the numbers and this executive secretary will pay $11,125 in federal taxes.  Now let’s assume Warren Buffet has a half billion dollars in investments that pay a return of 8%.  That’s a capital gain of about $40 million.  Taxed at a paltry 15% capital gains tax that’s a measly $6 million in federal taxes.  Funny.  His secretary has a higher tax rate.  But Buffet pays approximately 53,833% more in tax dollars.  I don’t know how you can say one person paying $40 million in taxes isn’t paying his fair share.

Should we keep tax loopholes for oil companies? Or should we use that money to give small business owners a tax credit when they hire new workers? Because we can’t afford to do both. Should we keep tax breaks for millionaires and billionaires? Or should we put teachers back to work so our kids can graduate ready for college and good jobs? (Applause.) Right now, we can’t afford to do both.

This isn’t political grandstanding. This isn’t class warfare. This is simple math. (Laughter.)

This is nothing but political grandstanding and class warfare.  And rather Orwellian.  In Nineteen Eighty Four, they just changed the meaning of words to control the people.  Such as slavery is freedom.  But changing the meaning of words doesn’t change what slavery is.  It’s still slavery.  No matter what you call it.  And political grandstanding and class warfare is political grandstanding and class warfare.  Even if you say it isn’t.

Now it’s time to clear the way for a series of trade agreements that would make it easier for American companies to sell their products in Panama and Colombia and South Korea -– while also helping the workers whose jobs have been affected by global competition.

America can’t compete with China because Chinese labor is cheaper.  So to make American products more competitive the president wants to subsidize our high cost of labor.  With American tax dollars.  Spread the higher cost of U.S. goods throughout the American economy.  Leaving everyone with less money for their own personal needs.  So we can keep Big Union working.  And supporting the Democrat Party.  Which will only increase government spending.  Our deficit.  And our debt.

To subsidize Big Labor they’ll have to pill that money out of the private sector economy first.  So you subtract X from the private sector economy.  And give X to Big Union.  Less an administration fee, of course.  Meaning that there will be a net loss of economic activity.

If we provide the right incentives, the right support — and if we make sure our trading partners play by the rules — we can be the ones to build everything from fuel-efficient cars to advanced biofuels to semiconductors that we sell all around the world.

The free market doesn’t need government incentives and support.  They did fine and dandy in the old days without any government help.  And making our trading partners play by the rules?  If you could do that they would be playing by the rules already.  There’s nothing you can do to make China stop undervaluing the yuan.  Unless you want to throw up protective tariffs on Chinese goods.  Of course they’ll retaliate.  Which will only make everything more expensive for the American consumer.  Besides, we already tried this.  Just before the Great Depression.

You really want to talk about the government picking winners and losers (i.e., incentives and support)?  Really?  After the Solyndra bankruptcy?  And the FBI raid on their executive homes?

Well, I agree that we can’t afford wasteful spending, and I’ll work with you, with Congress, to root it out. And I agree that there are some rules and regulations that do put an unnecessary burden on businesses at a time when they can least afford it. (Applause.) That’s why I ordered a review of all government regulations.

Didn’t Al Gore already reinvent government?  To root out wasteful spending and regulations?  Yeah, he did.  Or tried.  Turns out that’s a lot easier said than done.  Especially when you don’t really mean it.  I mean, come on, the Left lives and dies for these costly regulations.  They’re not just going to sit idly by and let them get repealed.  Not when they fund Democrat candidates in elections.

But what we can’t do — what I will not do — is let this economic crisis be used as an excuse to wipe out the basic protections that Americans have counted on for decades.

Really?  So you’re not going to let anyone do what you did?  Like Rahm Emanuel said, “You never want a serious crisis to go to waste.”  When you used the worst recession since the Great Depression to pass your stimulus?

Basic protections are one thing.  But your regulatory zeal has shut down this economy.  Just ask the Gulf oil workers.  If you can find any.  Because they aren’t working on rigs in the Gulf anymore.  Thanks to you.

We all remember Abraham Lincoln as the leader who saved our Union. Founder of the Republican Party. But in the middle of a civil war, he was also a leader who looked to the future — a Republican President who mobilized government to build the Transcontinental Railroad — (applause) — launch the National Academy of Sciences, set up the first land grant colleges. (Applause.) And leaders of both parties have followed the example he set.

The seeds of the first transcontinental railroad were sowed back in the 1830s.  Lincoln became president in 1861.  The NAS was established by an Act of Congress.  Land grant colleges came into being in with the Morrill Acts of 1862 and 1890.  First introduced in 1857.  Abraham Lincoln wrote the Emancipation Proclamation.  But he did not create these other acts of Congress.  Congress did. 

And the transcontinental railroad?  That was Congress, too.  And one of the most corrupt Congresses in history.  The incentives and support Congress gave encouraged them to build track on ice.  Zigzag to cover as much land as possible to claim the mineral rights beneath. And when east and west finally met, they kept building track.  Parallel to each other.  To keep collecting money for track mileage laid.  And the cost overruns made a lot of Congressmen wealthy.  No, this railroad was not America’s finest hour.

How many jobs would it have cost us if past Congresses decided not to support the basic research that led to the Internet and the computer chip?

The government Internet (DARPA) was nothing more than file sharing and email for scientists.  If private enterprise and entrepreneurs didn’t step in that’s what the Internet would still be. 

The computer chip?  Funny. I thought that was Texas Instruments and Fairchild Semiconductor.  Which was ultimately based on the transistor.  Invented in 1947 by John Bardeen, Walter H. Brattain, and William B. Shockley of Bell Labs.  Who replaced vacuum tubes with semiconductors everywhere.  Except in high-end audio amplifiers.

What kind of country would this be if this chamber had voted down Social Security or Medicare just because it violated some rigid idea about what government could or could not do? (Applause.) How many Americans would have suffered as a result?

Actually they’d probably be a lot better off.  As far as a return on investment, Social Security is one of the worst retirement investments out there.  Why?  Because it’s not an investment.  Your money goes into the Social Security trust fund.  Where it ‘waits’ for your retirement.  But before you do, the government takes that money and spends it.  Leaving an IOU in the trust fund.  This is no IRA.  No 401(k).  No mutual fund.  It’s not even a savings bond.  In fact, if you die before you collect, all that money you paid in is kept by the government.  It doesn’t go to your heirs with the rest of your estate.  Like an IRA, a 401(k) or a mutual fund would.

But Social Security has been a real success.  For the government.  Because it has made generations of people dependent on government in their retirement.  Who live in fear of losing their benefits.  And will do anything to keep those benefits coming.  Even if it means screwing their own children.  And their grandchildren.  They’re so frightened by the Democrats that they will vote Democrat.  No matter how much the Democrats steal from future generations.

I don’t pretend that this plan will solve all our problems. It should not be, nor will it be, the last plan of action we propose.

That’s right.  You never want a serious crisis to go to waste.  And they will milk this for all it’s worth.  Stimulus.  Bailing out the UAW pension funds (i.e., the auto bailout).  Financial reform.  Obamacare.  Everything they’ve always wanted.  But could never get through the normal legislative process.

The Problem with Barack Obama is that he’s a Keynesian who wants to Grow the Government

Once again the professor scolds those who don’t agree with him.  And offers more of the same.  Which has already failed to reverse the worst recession since the Great Depression.  And it’s not going to work this time.  How do we know this?  Because if this stuff worked it would have worked the first time.

And it would be nice to see the plan before our representatives pass the plan.  For as CBO said before, you just can’t score a speech.  We need to see the numbers.  And the leaps of faith.  But I guess it’s hard to quantify soaring rhetoric.  Especially when you’re offering the same thing.  That you’re trying to make sound different this time.

The problem with Barack Obama is that he’s a Keynesian.  With one slight difference.  Keynesian stimulus is supposed to be temporary.  Whereas Obama’s stimulus gets added into the baseline budget.  Making his stimulus spending permanent.  His number one goal isn’t growing the economy.  It’s growing the government.  That’s why his polices don’t help the economy.  But they sure have grown the government.  And in Obama’s book that’s mission accomplished. 

But he sure would like a second term to continue the fun.  But I just don’t see that happening.  For I can’t see how he can fool that many people into believing that they’re better off after four years of his policies.

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FUNDAMENTAL TRUTH #76: “You know they’re governing against the will of the people when they play with the meaning of words to fool the people.” -Old Pithy

Posted by PITHOCRATES - July 26th, 2011

The More they Trust You the Easier it is to Lie to Them

People lie for one reason.  They don’t want you to hear the truth. Sometimes it’s done with good intentions.  “No, those jeans don’t make your butt look big.”  Most times it’s not.  “I am not having an affair.  And I can explain those earrings you found in the backseat.  And the underwear that’s not yours.  Just give me a minute.”

The truth about lying is the truth.  And someone’s attempt to hide it.  A husband doesn’t tell his wife about an affair.  Because he doesn’t want his wife to know about the affair.  For a variety of reasons.  But mostly so he can keep having the affair.

And this is why people lie.  To continue doing something they couldn’t otherwise do.  By misleading those people who know them.  Who love them.  Who trust them.  And the funny thing is, the more they trust you the easier it is to lie to them.  “Look, honey, I didn’t want to say anything before.  But the rumor at work was that John and Mary were having an affair.  I didn’t believe it at first.  I mean, they’re both married.  And they’re more than just my coworkers.  They’re my friends.  Then one day John had to borrow my car.  So I lent it to him.  The next thing Bill tells me is that he sees John and Mary in my car turning into an alley.  Guess I know what they were doing in that alley.”

See?  Easy.

Good Lying is about Creative Language and Class Warfare

So if you’re into lying it’s best to get yourself into a position where lots of people trust you.  Like elected office.  Because for some reason people tend to trust anyone in government.  Far more than those evil greedy people in corporate America.  Or rich people in general.  Even though it’s a given that politicians lie.  It is an interesting dynamic.  How this inherently dishonest institution is trusted first then questioned about their honesty later.  Long after the scandals that follow them.  So how do they do it?  How do these liars get to be so trusted?

It’s all about creative language.  And class warfare.  You need to get people to hate each other.  And then you stoke those passions.  Keep them burning hot.  So they feel more than think.  For the less they think the more they’ll fall for your soaring rhetoric.  You say the rich should pay their fair share (even though they pay a disproportionate high percentage of taxes).  And that rich CEOs shouldn’t get tax breaks to fly around in their private jets (even though they use them for legitimate business purposes).  You cast yourself as the protector of the little guy against rich and corporate interests.  Even though you’re anything but.  But that’s how it’s done.  And no one does it better than liberal Democrats.

For they are the king of liars.  Ivy League educated.  Arrogant.  Pompous.  Filled with an air of all-knowing condescension.  They just brim with loathing and self-confidence.  They loath you and I who are not their equals.  And they believe that there is nothing that they can’t do.  And what do they want to do?  Tax and spend.  Control the economy.  And tell us how we should live.  In the enlightened world they envision.  Of course, this has not proven to be a successful political platform.  People don’t want to elect people like this.  So they lie about what they want.  And who they are.  With a creative use of language.

Twisting the Meanings of Words

No one likes paying taxes.  No one will vote for someone who says they’re going to raise their taxes.  Which is a bit of a problem for a tax and spend liberal.  So they don’t use the ‘T’ word.  No.  Instead, taxes are called ‘contributions’.  Or simply ‘revenue’.  Because contributions sound voluntary.  And revenue sounds kind of warm and fuzzy.  In the business world, raising revenue is a good thing.  And they hate taxes in the business world.  Just like you.  So you feel less threatened about talks to raise revenue than you do about talks to raise taxes.  Even though they are the same thing.

With ever growing deficits, some people are growing a little skittish about excessive government spending.  At least, the people paying the taxes.  Those people with jobs.  They don’t want to pay more in taxes.  And they’re getting a little nervous about the huge federal debt.  So the responsible side in them tells them to say ‘no’ to more spending.  So the tax and spend liberal uses the word ‘investment’ instead.  They say we need to invest in infrastructure to rebuild our aging roads and bridges (even though gasoline taxes already pay for this work).  That we need to invest in education and research to keep America on the forefront of technology (even though we already spend a fortune on these already).  Investing in our future?  Well, yes, that sounds good.  And perhaps we should.  So we agree not to cut these investments.  But we’ll still resist excessive government spending.  Even though these are the same thing.

You see, the tax and spend liberal looks at the economy differently.  They see all money belonging to them.  Including ours.  They let us work.  Earn a paycheck.  But your net pay is only the portion of their money they begrudgingly let you keep.  In fact, what they don’t tax away from you they call government spending.  Or tax expenditures.  They’ll say things like, “We can’t afford to pay for these tax cuts.”  Of course, you don’t pay for ‘tax cuts’.  A tax cut is when the rightful owner of the money gets to keep it.  Instead of the government taking it away.  But calling this ‘government spending’ makes it easier to cut.  For cutting spending is a responsible thing to do.  But when they cut this spending they are actually raising taxes.  Clever, eh?  Talk about twisting the meaning of words.

Here are some other words and phrases they use and their translation:

  • Bipartisan = Republicans giving Democrats everything they want
  • Compromise = see bipartisan
  • Future spending cuts = no spending cuts
  • A balanced budget approach = higher taxes now and future spending cuts later (see future spending cuts above)
  • Get serious about deficit reduction = increase both spending and taxes
  • Blue ribbon panel/special commission = where you place an issue that you’re afraid to address
  • Failed policies of the past = the very successful policies of Reaganomics
  • Radical right wing = any Republican that doesn’t vote for more Democrat spending

 Republicans have Less to Hide

Liberal Democrats lie because no one wants what they’re selling.  But because they’re so much smarter than we are they’ve come up with a way to fool us.  By lying.  And using Orwellian language.  To make us accept things that we would normally not accept.

Just look at their campaigns.  And their language.  They campaign as moderates.  Then govern as liberals.  They want to raise our taxes.  But they don’t tell us that they want to raise our taxes.  Why?  Because taxpayers don’t share their Orwellian vision.  For if the people believed as they believed they would be honest.  But they don’t.  So they are less than honest.

Republicans, on the other hand, call ‘tax cuts’ tax cuts.  And ‘tax hikes’ tax hikes.  They run as conservatives.  And govern as conservatives.  Until they’re corrupted by Washington, at least.  But based on language usage alone even the most partisan hack would have to admit that the Republicans have less to hide.  And, therefore, govern more according to the will of the people.

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Only Obama can make the U.S. Default on its Debt Obligations

Posted by PITHOCRATES - July 15th, 2011

$172.4 Billion is a lot of Money

Still no closer to a budget agreement to raise the debt limit.  Obama wants more taxes and more borrowing.  The Republicans want a little fiscal sanity.  Because something is definitely wrong in Washington when $172.4 billion a month isn’t enough (see August Invoices Show U.S. Treasury’s Limited Choices by David Rapp posted 7/12/2011 on Bloomberg Government).

The U.S. government, whose legal authority to borrow money expires on or about Aug. 2, expects to take in $172.4 billion next month — enough to cover little more than half of its bills due then, according to a study for the Bipartisan Policy Center, a research organization.

The U.S. may not have to default on outstanding debts or withhold interest payments for that month; it may be able to cover $29 billion in anticipated interest due on Treasury securities with its cash receipts…

Jay Powell, undersecretary of the Treasury for Finance under President George H.W. Bush, calculated for the policy center that $306.7 billion in bills will come due after Aug. 2. They include Social Security benefits, defense vendor payments and military active duty pay, along with federal pay for every department and agency, in addition to the interest payments.

I think we’re missing the bigger picture here.  The government collects $172.4 billion but spends $306.7 billion.  That is, for every dollar it collects it spends $1.78.  In other words, the government’s spending is 78% over their cash budget.  Managers in the corporate world get fired for performances like this. 

That is either a big spending problem.  Or a big revenue problem.  So are taxes too low?  I don’t think so.  I mean, $172,400,000,000 is a lot of money.  How much?  It’ll buy 542 of the new Boeing 747-8 jetliners.  Or 149 Dallas Cowboys Stadiums.  Or 27 nuclear powered aircraft carriers.  It’ll even pay for the Apollo moon program with $41.3 billion left over.  $172.4 billion is an enormous amount of money.  You couldn’t spend this much money if you tried.  Even if you bought the best houses, cars, jewelry, clothes, island, etc.  And if you had the mother of all drug addictions.  It’s just a staggering amount of money.  And if you’re collecting in taxes more money than the cost of the Apollo moon program each month, guess what?  You don’t have a revenue problem.  You have a spending problem.

Bloomberg has a nifty little calculator on their website.  You can put checks on the things you want to pay.  And leave the things you don’t unchecked.  It’s an interesting list of bills coming due this month.  There’s a lot of stuff we can cut easily to save $47.1 billion.  Federal salaries & benefits ($14.2 billion).  Small Business Administration ($0.3 billion).  Education Department ($20.2 billion).  Department of Housing and Urban Development ($6.7 billion).  Energy Department ($3.5 billion).  Labor Department ($1.3 billion).  Environmental Protection Agency ($0.9 billion).  What taxpayer would miss any of these?  Cuts to Social Security and Medicare, on the other hand, will be a little more difficult.  For they actually do something.  And people will miss them.

Incidentally, interest on the debt is $29 billion.  Though a lot of money, it’s not too high for the $172.4 billion to cover.  So if the Obama administration doesn’t pay this and causes a downgrade in our credit rating, President Obama will have some ‘splaining to do.

Monthly Spending Equivalent to 1.3 Apollo Programs should be Enough

The president has no intention of cutting spending.  Their goal is to make Republicans look bad.  And to better position themselves for the 2012 election.  So the president will lie and spin misinformation in hopes that this stuff is just too complicated for the layperson to follow.  And that they only remember one thing.  That Republicans stopped Social Security checks going out because they’d rather give tax breaks to the rich.  And that they miss the fact that Obama and his Democrats gave us this crisis to begin with.  With the greatest spending orgy of any peacetime president.  So he threatens that if the Republicans don’t pay for his reckless spending, he’s going to tell everyone it’s their fault that the country defaulted (see Obama: Chance for ‘something big’ to calm economy by Jim Kuhnhenn, Associated Press, posted 7/15/2011 on Yahoo! News).

Obama urged Republican lawmakers to make tough calls, too. He attempted to turn their opposition to any tax increases back against them, warning that a government default caused by failure to raise the debt ceiling would increase interest rates, “effectively a tax increase for everybody.”

No, a failure to raise the debt ceiling won’t cause a government default.  Barack Obama will.  If and when he decides to pay something he thinks is more important than the interest on the debt.

Obama sternly rejected any plan of that size that did not include increases in tax revenue.

Apparently spending the equivalent of 1.3 Apollo programs a month just isn’t enough.  Obama gives new meaning to tax and spend liberal.  Pity Ted Kennedy didn’t live long enough to work with his kind of liberal in the White House.  Or see his pet cause, national health care, signed into law.  Then they both could have seen their policies destroy this country.  Don’t believe me?

Spending/Debt so bad it’s bringing back the Gold Standard

Then ask the Chinese communists.  Though their economy is rife with cronyism and will no doubt collapse as the Japanese economy did in the Nineties, they know too much debt when they see it (see Return of the Gold Standard as world order unravels by James Quinn and Ambrose Evans-Pritchard posted 7/16/2011 on The Telegraph).

Xia Bin, an adviser to China’s central bank, said in June that the country’s reserve strategy needs an “urgent” overhaul. Instead of buying paper IOU’s from a prostrate West, China should invest in strategic assets and accumulate gold by “buying the dips”.

Step by step, the world is edging towards a revived Gold Standard as it becomes clearer that Japan and the West have reached debt saturation. World Bank chief Robert Zoellick said it was time to “consider employing gold as an international reference point.” The Swiss parliament is to hold hearings on a parallel “Gold Franc”. Utah has recognised gold as legal tender for tax payments.

A new Gold Standard would probably be based on a variant of the ‘Bancor’ proposed by Keynes in the late 1940s. This was a basket of 30 commodities intended to be less deflationary than pure gold, which had compounded in the Great Depression. The idea was revived by China’s central bank chief Zhou Xiaochuan two years ago as a way of curbing the “credit-based” excess.

So the Chinese, the World Bank, the Swiss, Utahans and a dead John Maynard Keynes agree that the U.S. has a spending problem.  A spending problem that is racking up debt to saturation.  So bad that the once invincible U.S. dollar should no longer serve as the world’s reserve currency.  A sad development indeed.  And painful to hear.  Especially coming from a commie.

Tax Hikes First, then Broken Spending Cuts Promises

And yet the president is in denial.  He doesn’t see a spending/debt problem.  He sees a revenue problem.  Because high taxes and high debt are okay in his world.  As long as they pay for liberal government spending.  That’s why he’s dead set against spending cuts only.  He wants those tax hikes.  He needs those tax hikes.  And will promise almost anything to get those tax hikes.  Because once he does, and mark these words well, he will break every spending cuts promise he made to get them.

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The Obama Budget: High Taxes, Reckless Spending and Lies

Posted by PITHOCRATES - April 18th, 2011

Is it how Much we Give or how Much we Could Give that Counts?

Imagine, if you would, two people standing in front of an orphanage.  There’s a donation box there.  And we can see these caring people actually count out their money before placing it in the donation box.  One counts out $20.  The other counts out $100.  Who is more generous?

Is this a trick question, you ask?  Well, yes, I guess it is.  You see, normal people, like you and me, are inclined to say the person donating the $100 is more generous.  I mean, $100 is more than $20.  $100 buys more than $20.  $100 will do more for orphans than $20.  So it sure looks like to us, the normal people, that the $100 donation is the more generous donation.  But that’s not the way government would see it.  For I left out one important piece of information.  I didn’t say how wealthy these people are.  So let’s do that now.  The $20 donation is from a UAW line worker.  The $100 donation is from a rich business owner.  Now who is more generous?

$100 will still buy more than the $20 for the orphans, but $100 is a smaller percentage of the business owner’s salary.  The $20 donation is a larger percentage of the UAW line worker’s salary.  So, people in government, and those on the Left, will say the $20 donation is the more generous donation.  Even though it will buy less for the orphans.

We Pay Tax Dollars, not Tax Rates

This is a big problem clouding the debate over ‘fair’ taxation.  Devious politicians point to tax rates and cry that the rich aren’t paying their fair share.  When, in fact, they are paying far more tax dollars than those less rich.  Even in an attack on these rich bastards shows this (see Only Little People Pay Taxes by Dave Gilson posted 4/18/2011 on Mother Jones).

Leona Helmsley’s distaste for paying taxes eventually landed her in federal prison. But the rich have little need to break the law to avoid the tax collector. As Martin A. Sullivan of Tax.com recently calculated, a New York janitor making slightly more than $33,000 a year pays an effective tax rate of nearly 25%. And the effective tax rate for a resident of the Park Avenue building named after Helmsley, earning an average of $1.2 million annually? A cool 14.7%.

And the chart following this shows the income and taxes of the Janitor and the millionaire.  And even though the millionaire pays only 14.7% in taxes, the actual tax dollars paid in income taxes is $159,515.  And how much did that janitor pay?  Just $3,168.  The cheap bastard, the millionaire, paid $156,347 more in income taxes.  That’s 4,935% more than the janitor paid in income taxes.  Yes, 14.7% is a smaller percentage than 25%, but there’s no math in the world that says the janitor paid more in income taxes than the millionaire.

There’s a difference between tax dollars and tax rates.  And tax rates don’t pay the bills.  Tax dollars do.  And the rich pay more of them by far.  Anyway saying otherwise is fostering class warfare for political purposes.  Because if it was about tax dollars to pay for federal spending, $159,515 pays for a lot more spending than $3,168. 

Low- and Middle-Income Families don’t Pay their Fair Share of Taxes

So if the rich aren’t paying their fair share of taxes, who is?  And are there others, too, not paying their fair share?  Of course, that can’t be.  Because only the rich can get away with cheating the…  Hello, what’s this?  Low- and middle-income families aren’t paying any federal income taxes?  Really?  How can that be?  Wasn’t it the rich blankity blanks that were screwing the poor?  Not the other way around (see Nearly half of US households escape fed income tax by Stephen Ohlemacher, Associated Press Writer, posted 4/7/2011 on Yahoo! Finance)?

About 47 percent will pay no federal income taxes at all for 2009. Either their incomes were too low, or they qualified for enough credits, deductions and exemptions to eliminate their liability. That’s according to projections by the Tax Policy Center, a Washington research organization…

In recent years, credits for low- and middle-income families have grown so much that a family of four making as much as $50,000 will owe no federal income tax for 2009, as long as there are two children younger than 17, according to a separate analysis by the consulting firm Deloitte Tax.

Really?  They’ve told us that people flipping burgers for minimum wage were poor, but even people earning $50,000 are poor?  No wonder we have so many people in poverty.

The result is a tax system that exempts almost half the country from paying for programs that benefit everyone, including national defense, public safety, infrastructure and education. It is a system in which the top 10 percent of earners — households making an average of $366,400 in 2006 — paid about 73 percent of the income taxes collected by the federal government.

The bottom 40 percent, on average, make a profit from the federal income tax, meaning they get more money in tax credits than they would otherwise owe in taxes. For those people, the government sends them a payment…

In 2007, about 38 percent of households paid no federal income tax, a figure that jumped to 49 percent in 2008, according to estimates by the Tax Policy Center.

No wonder the Democrats win elections.  You know there are a lot of Democrats in that 49% not paying federal income taxes.  That makes the Democrats a modern day Robin Hood.  Stealing from the rich.  And giving to the low- and middle-income.  And when you’re on the receiving end of this bounty, you’re all for class warfare.  Screw the rich, you’ll shout.  Until, God forbid, you become rich.  Just ask Nicholas CageSinbadWesley Snipes.  Or Willie Nelson.  And anyone who won the lotto.  Or a car.  Who did not realize that their bounty came with a hefty tax obligation (there’s no tax withholding for these people.  They have to write a check for all the taxes they owe).  People are stunned to learn the amount of their money the government wants.  And that isn’t fair.  But before they were rich, that was a different story.  Then nothing was fairer than sticking it to the rich.

The Rich aren’t Rich Enough to Pay all our Taxes

If the poorest half of all Americans aren’t paying any taxes, then who, exactly, is?  I mean, if the rich aren’t paying their fair share and the poor aren’t paying anything, who does that leave (see Where the Tax Money Is posted 4/17/2011 on The Wall Street Journal)?

Consider the Internal Revenue Service’s income tax statistics for 2008, the latest year for which data are available. The top 1% of taxpayers—those with salaries, dividends and capital gains roughly above about $380,000—paid 38% of taxes. But assume that tax policy confiscated all the taxable income of all the “millionaires and billionaires” Mr. Obama singled out. That yields merely about $938 billion, which is sand on the beach amid the $4 trillion White House budget, a $1.65 trillion deficit, and spending at 25% as a share of the economy, a post-World War II record.

That’s funny.  I thought the rich weren’t paying their fair share.  And in 2008 the top 1% paid 38% of all taxes.  I don’t know, but 38% sounds like a lot more than the 0% paid by the poorest 50%.  So the rich are paying a lot.  Can they pay more?  Can they pay all of our taxes?  Well, even if you confiscate all of the top 1%’s income, no.  They can’t.  They simply aren’t rich enough.

Say we take it up to the top 10%, or everyone with income over $114,000, including joint filers. That’s five times Mr. Obama’s 2% promise. The IRS data are broken down at $100,000, yet taxing all income above that level throws up only $3.4 trillion. And remember, the top 10% already pay 69% of all total income taxes, while the top 5% pay more than all of the other 95%.

The richest 10% of all Americans, including everyone making $100,000 or more, won’t do it either.  At least, they can’t fund a $4 trillion budget.  Which means there’s no way no how you can pay for government by taxing the rich.  Even if you tax them at 100%.  You see, these rich simply aren’t rich enough.  You know who is, though?  The middle class.

So who else is there to tax? Well, in 2008, there was about $5.65 trillion in total taxable income from all individual taxpayers, and most of that came from middle income earners. The nearby chart shows the distribution, and the big hump in the center is where Democrats are inevitably headed for the same reason that Willie Sutton robbed banks.

This is politically risky, however, so Mr. Obama’s game has always been to pretend not to increase taxes for middle class voters while looking for sneaky ways to do it…

Keep in mind that the most expensive tax deductions, in terms of lost tax revenue, go mainly to the middle class. These include the deductions for state and local tax payments (especially property taxes), mortgage interest, employer-sponsored health insurance, 401(k) contributions and charitable donations. The irony is that even as Mr. Obama says he merely wants the rich to pay a little bit more, his proposals would make the tax code less progressive than it is today.

The $100-200 thousand earners are the largest group of earners in the country.  They may each make less than each of the top 1%, but their numbers are far greater.  And it adds up.  If you drop that low end to $50 thousand and the total pot of income is close to $3 trillion dollars.  That’s a lot of money to tax.  And a lot of tax deductions to disallow.  That’s the sweet spot.  The $50-200 thousand earners.  They’re just one plump, stuffed, cash piñata.  And oh how they want to whack it open.  But how to do it?  And blame the Republicans?  That is the question that faces them.

Only the Middle Class can Fund a $4 Trillion Budget

And you do this, of course, by lying.  In his speech to offer his ‘budget’ in a response to the Ryan budget, Obama said he would cut the deficit by $4 trillion over the next 12 years.  How?  In part with $2 trillion in spending cuts.  Which aren’t exactly all spending cuts.  They’re actually tax increases.  You see, he sees tax breaks and credits as federal spending.  Because it costs government by not having that money collected as a tax.  So he will cut that ‘spending’.  By eliminating those tax breaks and credits.  Resulting in you paying higher taxes.  And that additional money the government is ‘taking back from you’ will lower the deficit.  Confused?  You should be.  This is about as devious as it gets.

And he also said he would save $1 trillion by not renewing the Bush tax cuts.  So that’s another $1 trillion in new taxes (see Obama’s $2 trillion stealth tax hike by James Pethokoukis posted 4/17/2011 on Reuters).

If you’re keeping score, what Obama is actually proposing is $1 trillion in new taxes on wealthier Americans (and small businesses) and $1 trillion in higher tax revenues by reducing tax breaks and subsidies for a total of $2 trillion in new taxes over 12 years. That means total debt reduction, not counting interest, would be $4 trillion, 50 percent of which would come from higher taxes. The econ team at Goldman Sachs ran a similar analysis and found that 56 percent of Obama savings over ten years could come from higher tax revenue.

So that’s $2 trillion in new taxes.  And where do you think that will come from?  Not the 1%, that’s for sure.  If you took all of their money it would only get you half way there.  To raise that kind of money, you have to go to the sweet spot.  The middle class.  Including those making far less than $200,000.  You have to tax everyone making $50,000 or more.  And take away their tax breaks and credits.  Where it will really hurt.  And be political suicide.  So why promise to do just that?  Simple.  He’s not. 

The Obama plan is a non-plan.  It’s just a political tool for the 2012 election.  To show that it is the Republicans that want to cut Social Security, Medicare and Medicaid.  Not him.  He’ll say he fought like a dog to save these entitlements.  Because he cares for you.  Unlike those nasty mean Republicans.  And entitlement spending will continue to grow unchecked.  Making it that much harder to save these programs down the road.  But this is what politicians do.  Kick the can down the road.  For someone else to worry about.  For by that time, many of the Democrats will be dead.  And won’t care anymore.

It’s not the Taxes, Stupid.  It’s the Spending.

There’s a difference between tax rates and tax dollars.  And it’s the tax dollars that are important, not the tax rates.  The rich may have a lower effective tax rate but they pay an awful lot in tax dollars.  And as tax dollars go, they’re paying more than anyone else.  Far more than half of all Americans.  Who pay $0.00 in federal income taxes.  If anyone is screwing anyone, it’s the lower 50% screwing the top 10%.  And the top 10% probably wouldn’t mind so much if we weren’t constantly demonizing them despite their generosity.

When you can’t pay for your spending by taxing everyone making $100,000 or more at 100%, you’re spending too much.  This is a spending problem pure and simple.  It’s not that the rich aren’t paying their fair share in taxes.  They are.  And then some.  It’s that government is just trying to buy too many votes.  If there is any greed here it is in Washington.  Their spending is out of control.  Even Standard & Poor’s Ratings Service thinks so.  They just lowered our rating from “stable” to “negative” because of the “ballooning deficit.”   Because our out of control spending threatens our future ability to service our debt.

But the Democrats have other pressing concerns on their minds.  Like winning elections.  And you win elections by spending.  Not living within your means.  And if they play it just right, the day of reckoning will come conveniently in the future.  When they’re dead.  Problem solved.  For them, at least.  Their children and grand children?  Guess they just don’t care about them.

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Obama’s Speech to cut the Deficit Appeals to Tax and Spend Liberal Base

Posted by PITHOCRATES - April 13th, 2011

Deficits are caused by Tax Breaks, not Spending

President Obama was taking some heat for not being engaged in the budget process.  So he sucked it up.  Put a plan together.  And went on television at the same time the Rush Limbaugh program aired I guess in hopes that people would be listening to Rush instead of his less than inspiring speech (see The Presidential Destroyer posted 4/14/2011 on The Wall Street Journal).

Mr. Obama did not deign to propose an alternative to rival Mr. Ryan’s plan, even as he categorically rejected all its reform ideas, repeatedly vilifying them as un-American. “Their vision is less about reducing the deficit than it is about changing the basic social compact in America,” he said, supposedly pitting “children with autism or Down’s syndrome” against “every millionaire and billionaire in our society.” The President was not attempting to join the debate Mr. Ryan has started, but to close it off just as it begins and annihilate any possibility of good-faith cooperation.

Mr. Obama then packaged his poison in the rhetoric of bipartisanship—which “starts,” he said, “by being honest about what’s causing our deficit.” The speech he chose to deliver was among the most dishonest in decades, even by modern political standards.

Attack the Republicans for being toadies of the rich in their never ending quest to kill children.  Condemn the Republican proposal as being wrong with all knowing condescension without having anything better to offer himself.  Blame the deficits on unfair tax cuts for the rich, not on the explosion in federal spending under his watch.  Same old same old.  Campaign rhetoric.  Forever the candidate.  Wholly uncomfortable in the role of president.

Mr. Obama said that the typical political proposal to rationalize Medicare’s gargantuan liabilities is that it is “just a matter of eliminating waste and abuse.” His own plan is to double down on the program’s price controls and Gosplan-like central planning. All Medicare decisions will be turned over to and routed through an unelected commission created by ObamaCare—which will supposedly ferret out “unnecessary spending.” Is that the same as “waste and abuse”?

Fifteen members will serve on the Independent Payment Advisory Board, all appointed by the President and confirmed by the Senate. If per capita costs grow by more than GDP plus 0.5%, this board would get more power, including an automatic budget sequester to enforce its rulings. So 15 Solons sitting in a room with the power of the purse will evidently find ways to control Medicare spending that no one has ever thought of before and that supposedly won’t harm seniors’ care, even as the largest cohort of the baby boom generation retires and starts to collect benefits.

Interesting.  The UK is working on revising their National Health Service (NHS), too.  Which is very similar to what Obama is proposing.  The NHS is a big centralized behemoth.  For now, at least.  You see, the British are doing the opposite of what Obama wants to do.  Because over the great many years of the NHS, they have found that the big centralized behemoth doesn’t work well.  Unless your goal is to have high costs, long waits and a rationing of health care.  And this just begs the question.  If the British couldn’t do it, why in the world would anyone believe that the Obama administration can?

Every U.S. fiscal trouble, he claimed, flows from the Bush tax cuts “for the wealthiest 2%,” conveniently passing over what he euphemistically called his own “series of emergency steps that saved millions of jobs.” Apparently that means the $814 billion stimulus that failed and a new multitrillion-dollar entitlement in ObamaCare that had nothing to do with jobs.

Under the Obama tax plan, the Bush rates would be repealed for the top brackets. Yet the “cost” of extending all the Bush rates in 2011 over 10 years was about $3.7 trillion. Some $3 trillion of that was for everything but the top brackets—and Mr. Obama says he want to extend those rates forever. According to Internal Revenue Service data, the entire taxable income of everyone earning over $100,000 in 2008 was about $1.582 trillion. Even if all these Americans—most of whom are far from wealthy—were taxed at 100%, it wouldn’t cover Mr. Obama’s deficit for this year.

The cost of the Bush tax cuts per year are $370 billion.  The Obama stimulus was $814 billion.  Clearly, just looking at this alone makes the deficit Obama’s fault, not Bush’s.  In fact, Obama added some $4.3 trillion to the national debt in his first two years in office.  That’s $2.15 trillion per year.  Which is greater than $370 billion if my math is right.  In the grand scheme of things the Bush tax cuts are chump change.  But it’ll probably do a lot more to create jobs than that $814 billion waste in spending he called stimulus.

A trillion is a big number.  Taxable income of $1.582 trillion is a lot of money (the sum of income of everyone earning over $100,000).  But it’s still less than what Obama spends.  Damn these rich people.  They’re screwing this president again.  Not only do they not pay their ‘fair’ share in taxes.  They simply don’t earn enough to pay the taxes required to support his extravagant spending.  Even if Obama confiscated all of their income.

The People’s Budget: Governing against the Will of the People

All right, no one expected anything serious today.   Obama doesn’t do that.  He only campaigns.  And there’s an election coming up.  So he sure isn’t going to do anything foolish that might hurt his reelection chances.  Like governing.  And there is a good reason why he’s not trying to get serious with the budget.  Because if people found out what he really wanted to do, no one with a job would vote for him.  Because he’s a tax and spend liberal.  And that’s what he wants to do.  But can’t.  Because of those damn independent voters.  They have jobs.  And the votes that will or will not make him a two-term president.  So he can’t afford to spook them.  Which isn’t pleasing his liberal base.  They’re getting fed up.  They want the liberal they helped to elect.

Making things even more uncomfortable for him, just under half of the House Democrats are as liberal as he is.  And they have put together a budget to counter the Ryan budget.  And it’s a liberal budget.  It shows who they really are.  And what they want to do to America (see The liberals’ plan: Gut defense and tax, tax, tax by Byron York posted 4/11/2011 on The Washington Examiner).

The “People’s Budget” is the liberals’ answer to House Budget Committee chairman Paul Ryan’s 2012 budget proposal, which is “leading us down a road to ruin,” according to caucus co-chairmen Reps. Raul Grijalva and Keith Ellison. The “People’s Budget,” Grijalva and Ellison claim, would eliminate the deficit in just 10 years (Ryan’s plan would take more than 25 years) while expanding, not cutting, Medicare, Medicaid and Social Security…

How can such fiscal miracles be accomplished? By tax increases that would make even some top Democrats gasp. Perhaps the most extraordinary is the caucus plan to raise the Social Security tax to cover nearly all of a taxpayer’s income…

The caucus would create three new individual tax brackets for the highest incomes, topping out at 47 percent. It would also raise the capital gains tax, the estate tax and corporate taxes. It would create something called a “financial crisis responsibility fee” and a “financial speculation tax.” And of course it would repeal the Bush tax cuts.

As if anyone needed reminding, the “People’s Budget” is proof that the liberal idea of budget balancing is tax, tax, tax. If you’re looking for spending cuts, you’ll find just one really big one: national defense. The liberals would end “overseas contingency operations” — the wars in Iraq and Afghanistan — starting in 2013. They would save more money by “reducing strategic capabilities, conventional forces, procurement, and research & development programs.” In other words, they would gut the United States’ ability to defend itself, today and long into the future.

Confiscatory taxes.  And more spending.  The problem with this is if you take away everyone’s wealth no one will want to create wealth.  If the government is going to provide a social utopia, why work?  Why work a 50-60 hour week just so you can pay most of your earnings in taxes?  When you can push a broom and live a comfortable life?  The Romans did just this and they had a problem.  People quit being farmers because the Roman government was taking most of their crops.  So the Romans passed laws putting a stop to this.  That’s right, if you were a farmer you stayed a farmer.  Whether you liked it or not.  And this is how you make confiscatory taxation work.  You make people work against their will.

Of course, Rome had another problem.  Citizens didn’t want to serve in the military anymore.  So they had to rely more and more on hired armies.  Which cost a lot of money.  And when they couldn’t pay them it caused problems.  The mighty Roman legions weren’t so mighty anymore.  And the empire became vulnerable to attack.  And it was.  Attacked.  And, ultimately, conquered.  But that could never happen here.  Because America has no enemies.  And is loved throughout the world.

If the liberals get their way, we may very well go the way of the Roman Empire.  And spend ourselves into oblivion.  Which is what tax and spend liberals do.

What would the liberals spend money on? The “People’s Budget” is essentially a newer and bigger stimulus bill. Grijalva and Ellison pledge to “invest $1.45 trillion in job creation, early childhood, K-12 and special education, quality child care, energy and broadband infrastructure, housing, and research and development,” along with billions more for stimuluslike road and other transportation programs.

Overall, the plan shows the gaping divide between the Progressive Caucus and the Obama White House. Back in his Chicago days, Barack Obama might easily have signed on to something like this. Now, as a president desperate for the support of independent voters in 2012, he can’t.

Yes.  If only if he was back in his good old Chicago days.  Obama would then embrace this budget.  As an activist you can do that sort of thing.  Because activists don’t solve any problems.  They just agitate.  And have fun.  Presidents can’t do that, though.  Sooner or later, they have to govern.  And when you do, you can’t govern against the will of the people.  For the people will reject you.  Especially those independent voters who have jobs.

Hating Republicans:  The Democrat Strategy

So while the Republicans try to address the unsustainable cost of entitlements, Obama and his Democrats are letting them.  While attacking them.  And this will probably carry us through the 2012 election season.  They’re trying to ‘Newt Gingrich‘ the Republicans.  Dance around in useless debate until they can get a ‘wither on a vine‘ sound bite.  Sure, the country will go further down the toilet.  But the more people hate Republicans the better their chances are at the polls.  Which is all they have.  Because their policies ain’t winning them any votes.  At least, not from the people who have jobs.

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